US Stocks Up After Bank Test Details; Nasdaq Streak Stands

RobCurran

NEW YORK (MarketWatch) -- U.S. stocks rose and the Nasdaq Composite marked its seventh straight week of gains as traders found criteria of a bank-stress test palatable.

At 2 p.m. EDT, the Federal Reserve laid out its framework for evaluating the nation's 19 largest banks, a peek at how regulators are determining whether larger banks need additional capital. Analysts had hoped for more specifics to help evaluate the extent of expected losses in the banking sector and to handicap winners and losers.

"There was not a whole lot of specificity in terms of what capital requirements are and what the losses were for the individual loan categories," said Jeff Morris, a vice president at Standard Life Investments.

"The real meat" on the stress test will be the results of the test in early May, said Morris. At that stage, the government will "name names," and identify those banks most in need of capital.

"The worry comes out of today's report is the mid-level banks that you don't see in the news every day," said Joe Kinahan, chief derivatives strategist at thinkorswim. He attributed the bounce after the test hit the tape to "short squeeze" as bears betting against the banks were forced to buy back the shares they had borrowed.

Shares of banks briefly dipped into the red, then popped back up as the Financial Select Sector SPDR closed up 24 cents, or 2.2%, to $10.94, up 86% from its low in March.

Citigroup fell a penny, or 0.3%, to 3.19, but is still more than triple its value at its March low. Like several banks on Wall Street, Citi's trading operations offset weakness in lending businesses and helped it log a first-quarter profit.

Bank of America rose 28 cents, or 3.2%, to 9.10, though it fell 14% on a week when questions about its acquisition of troubled broker Merrill Lynch arose.

Overall, the Dow Jones Industrial Average rose 119.23 points, or 1.5%, to 8076.29, though the Dow shed 0.7% on the week, snapping a six-week winning streak. The broad Standard & Poor's 500 rose 14.31, or 1.68%, to 866.23, and fell 0.4% for the week, also its first loss in seven weeks. The Nasdaq Composite continued to be the strongest of the three broad indexes, rising 42.08, or 2.55%, to 1694.29, bringing its gains for the year to date to 7.4%. The Nasdaq rose 1.3% on the week for the seventh straight week of gains, its longest run since 2005.

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